JG/Condos Canceled As Demand Dries Up

Indonesia is facing a gloomy outlook in its condominium business as some property companies defer their apartment projects and return their customers’ money as demand slows, a property analyst said on Monday.

“The tight monetary policy [high interest rates and tighter loan approvals] has impacted on project cash flow and turned off prospective buyers,” Utami Prastiana, a property analyst from Procon Indah, said in Jakarta, adding that further delays were likely to affect the sector until mid-2009.

One Park Residences, which has been developed in Kebayoran Baru by PT Gandaria Permai, a subsidiary company of PT Intiland Development Tbk, has delayed its condominium project and is going to return condo buyers’ money with interest soon, he said.

Utami said there were two other developers which had also canceled their projects because of the crisis, but refused to name them.

The Rp 300 billion ($27 million) residence projects, which was previously planned to be launched in the fourth quarter last year, was canceled due to the increasing price of project materials and a lack of demand from buyers, he said.

“In the fourth quarter last year the country’s rate for the amount of presold condominiums declined only slightly from 0.4 percent from its previous quarter of 95.6 percent to 95.2 percent,” Utami said.

The declining rate, she said, would continue into the first quarter this year, and likely to balloon to between 3 to 10 percent.

“Condo buyers are in a wait-and-see mode and prefer to keep their plans on hold until the interest rate goes back to normal or at least decreases from the current rate,” Utami said.

Procon’s 2008 report stated that 8,000 new condominiums were sold in Jakarta in 2008 from a supply of 8,400. The number sharply declined from the previous year’s report which saw around 12,000 units produced and sold in the same year.

In 2009, projected annual net supply of around 10,000 units will have a net take up of only 6,600. About 6,100 of those units are in mostly in less preferable locations such as on the borders of Jakarta, Utami said.

“Developers and buyers will be more rational in their investment decisions, therefore a few projects may not be completed on time,” he said.